Edinburgh Napier University has spun out a new company to commercialise a process of making biofuel from whisky by-products.

Celtic Renewables Ltd, a spin-out from the university's Biofuel Research Centre, will initially focus on bio-butanol, a next generation biofuel made from waste products generated from Scotland's £4 billion a year malt whisky industry.

Its fermentation process uses the two main by-products of whisky production: pot ale, the liquid from the copper stills, and draff, the spent grains to create bio-butanol.

Each year the whisky industry produces 1600 million litres of pot ale and 500,000 tonnes of draff.

Bio-butanol, unlike other biofuels currently being developed, can be used as a direct replacement for petrol, or as a blend, without the need for engine modification.

And in contrast to ethanol, it can run in unmodified engines at any blend with petrol and can also be blended with diesel and biodiesel.

Researchers behind the process say it has huge global potential as it can be adapted to process other biological by-products.

Professor Martin Tangney, founder of Celtic Renewables and director of the Biofuel Research Centre, said: "The Scottish malt whisky industry is a ripe resource for developing bio-butanol.

"The pot ale and draff could be converted into biofuel as a direct substitute for fossil-derived fuel, which would reduce oil consumption and C02 emissions while also providing energy security particularly in the rural and remote homelands of the whisky industry."

He added: "The launch of Celtic Renewables is a very exciting development and there is huge potential for applying our process on a global scale."

Minister for Energy, Enterprise & Tourism, Fergus Ewing MSP, speaking at the official launch of Celtic Renewables at the University's Sighthill Campus, said: Scotland's whisky has a world-wide reputation for excellence and generates huge benefits for our economy.

"It's fitting, then, that the by-products of this industry are now being used in an area where we have so much promise sustainable biofuels.

"Turning our whisky industry's by-products into raw materials for sustainable biofuels which can be used to power ordinary family cars is an example of the sort of innovative thinking Scotland excels in."

The initial research project received s267,000 of support from Scottish Enterprises Proof of Concept programme, and Celtic Renewables has since benefited from a s70,000Scottish Enterprise SMART: Scotland grant to assist the technology scale-up and commercial feasibility.

Celtic Renewables chief executive, Mark Simmers, joined the company via the Saltire Foundation Fellowship a Government and industry-backed initiative to align Scotland's next generation of leaders with promising new companies.

Lena Wilson, chief executive of Scottish Enterprise, said: "Celtic Renewables is a great example of how a company with global growth potential can be created from pioneering research.

"By supporting ideas with real commercial capability, we can help transform cutting-edge knowledge into new high-growth sustainable businesses for Scotland.

"We've worked closely with the management team, most recently through our high growth start-up team,to assist Celtic Renewables with its spin-out and initial funding phases, and well continue to work alongside the company to help it achieve its growth ambitions."